Ch. 8 notes - Ch.8notes 22:19 Four Market Models Pure...

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Ch. 8 notes Pure Competition in the Short Run 22:19 Four Market Models Pure competition – large number of firms producing a standardized product. New firms can enter/exit easily Imperfect competition Pure monopoly – one firm is the sole seller of a product or service. Entry of other firms is blocked, single unique product Monopolistic competition – relatively large number of sellers producing differentiated products Nonprice competition – firm doesn’t try to distinguish its product on the basis of price but instead on attributes like design and workmanship (product differentiation). Entry/exit pretty easy Oligopoly – only a few sellers of a standardized/differentiated product, each firm is affected by the decisions of its rivals and must take those decisions into account in determining its own price and output Pure competition Characteristics Very large numbers Standardized product – consumers indifferent about which seller to buy from, firms make no attempt to differentiate their products Price takers – individual firms have no control over product price, produces a small fraction of total output that increasing or decreasing its output will not perceptibly influence total supply or, therefore, product price Free entry and exit Demand Perfectly elastic!
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